From Justice Kennedy's opinion in Arizona Christian School Tuition Organization v. Winn:
Arizona provides tax credits for contributions to school tuition organizations, or STOs. STOs use these contributions to provide scholarships to students attending private schools, many of which are religious. Respondents are a group of Arizona taxpayers who challenge the STO tax credit as a violation of Establishment Clause principles under the First and Fourteenth Amendments.
A 5-4 majority concluded that respondents lacked standing. In the course of doing so, Kennedy explained the difference between tax credits and government expenditures:
Private citizens create private STOs; STOs choose beneficiary schools; and taxpayers then contribute to STOs. While the State, at the outset, affords the opportunity to create and contribute to an STO, the tax credit system is implemented by private action and with no state intervention. Objecting taxpayers know that their fellow citizens, not the State, decide to contribute and in fact make the contribution. These considerations prevent any injury the objectors may suffer from being fairly traceable to the government. And while an injunction against application of the tax credit most likely would reduce contributions to STOs, that remedy would not affect noncontributing tax payers or their tax payments.
He further explained why the distinction matters:
Like contributions that lead to charitable tax deductions, contributions yielding STO tax credits are not owed to the State and, in fact, pass directly from tax payers to private organizations. Respondents’ contrary position assumes that income should be treated as if it were government property even if it has not come into the tax collector’s hands.
Calvin Massey concurs, in part:
The assumption that any tax credit, deduction, differential rate, or exclusion from income is an expenditure does in fact rest on the obnoxious principle that the fruits of all gainful activity belong to the government, and it is a matter of legislative grace whether any citizen is left with any part of his or her efforts. The statist premise that undergirds that principle ought to be recognized and exposed, and I applaud the majority for doing so.
Justices Kagan (who wrote the dissent), Ginsburg, Breyer and Sotomayer supported the Respondents. In doing so, they necessarily embraced the obnoxious principle and its statist premise. We stand one supreme court vacancy away from giving these folks a majority. This is why I'm inclined to disagree with James Joyner, who recently opined that there's "a non-zero chance that I’ll find myself unable to support the [GOP] nominee this year" because the frontrunners are all crazy. I'm empathetic. I've sat out elections too (surely eh won't vote for Obama!). But I'm increasingly worried about the Supreme Court and increasingly willing to suck it up and vote for one of the crazies just Obama doesn't get 4 more years of chances to stuff the Supreme Court with these sort of statists.